The processing of oil and gas resources is very complex and require heavy investment in technology, money and skill. It’s no wonder that when oil and gas industry is mentioned, what readily comes to mind are the major oil producing companies like Chevron and Mobil.
What many may not know, however, is that there are a lot of small business ideas or opportunities in this very important sector in spite of its complexity. And that’s the focus of this blog post. In the paragraphs that follow, I shall highlight a few of the small business ideas that any smart entrepreneur can explore and make money in the oil and gas industry.
Let’s first take a cursory look at the Industry
A Brief About the Oil and Gas Industry
Oil and gas is a commodity that’s of global importance. In spite of progress made in the production of clean energy or alternative energy as is commonly described; oil and gas remains the major source of energy that runs the global economy.
The industry is divided into three segments: Upstream, Downstream and Midstream
Upstream business has to do with identifying, extracting a nd producing crude oil. It encompasses all activities related to the extraction and recovery of crude and associated raw materials from the ground. Companies engaged in upstream oil and gas activities are generally referred to exploration companies.
Oil exploration is highly technical and requires specialist skills and huge investment in equipment. The sector employs engineers, scientists, geologists, and geophysicists, amongst many others. Major players in the global upstream oil and gas industry include ExxonMobil, Royal Dutch Shell, Saudi Aramco, Chevron Corp, PetroChina, etc.
This is the sector that satisfy the demand for petroleum and its associated products. Thus, the sector impacts more on the consumer more than the upstream sector.
Downstream operations deals with the refining crude oil, processing of natural gas and the marketing, sale and distribution of refined and processed petroleum products. Gas stations, petroleum product marketing companies, big oil traders, etc., are some of the operators in the downstream oil and gas sector.
Midstream operations fall between upstream and downstream. Sometime there is no distinct demarcation between downstream and midstream.
It deals with the transportation and storage of petroleum products. Major operations here include pipelines, transportation by barges, rail and trucks. Provision and maintenance of storage facilities also fall under midstream operations.
Small Business Ideas in the oil and gas industry
As mentioned earlier, the oil and gas industry is highly technical. Major operations in the industry demands huge investment in terms of equipment, technology and human capital. But there are also opportunities for low capital investment in all the segments of the industry.
The big operators need small businesses and individuals to provide ancillary services and products that aid oil exploration, refining, processing and distribution.
Let’s take a look at a few of these small business ideas that anyone can explore in the oil and gas industry.
#1. Refilling of Cooking Gas
Market potential for cooking gas of LPG is huge. In Africa, cooking gas utilization is not evenly distributed. In Nigeria, for instance, per capital consumption of cooking gas is just about 1 kg per annum, lower than most her West African neighbours.
However, rapid urbanization and growing number of household who are abandoning kerosene stove for cooking gas are some of the factors driving demand. Besides Cooking gas cook food faster, it’s cheaper, cleaner and more environmentally friendly.
Cooking gas refill business is profitable. It is easy to start and requires minimal investment. A certain young man in Nigeria started this business with just 100,000 and was able to scale within a short period of time.
All it entails is to buy LPG from gas plants or depot in bulk; store in tank or big cylinders . From your storage facility you retail to consumers in smaller quantities. Usually consumers come in with their cylinders. Cylinders varies in sizes. 3kg, 6kg, 12.5kg, 25kg are the most common sizes.
To do this business, you will need to get some training in order to understand some peculiar details: how to measure, where to source your LPG, location, risk management and security measures, etc.
As at the time of researching for this post, with 200,000 or less, one can start Cooking Gas Refilling and Distribution business within his/her neighborhood. The profit potential is huge as with this level investment be sure of making a minimum of 60,000 monthly profits after taking care of all your expenses.
#2. Kerosene Retailing
Also known as Dual Purpose Kerosene (DPK), kerosene is one of the major by products from crude oil refining process.
Kerosene is in high demand. Nigeria consumes about 11 million litres of it per day. Some of the factors that drive the demand of kerosene in Nigeria are: large population of low income earners and poor electricity supply. Thus, a very large proportion of the population depends on kerosene for cooking and other energy needs.
Kerosene retailing business is about buying the product in bulk from depots and retailing it to households. It requires you constructing a storage tank (underground, or surface) and installing a dispensing pump fitted with a meter. It is from here that you will dispense.
Never mind if you don’t have money to invest in underground tank and dispensing pump. Get a welder to construct a tank for you. And from there you dispense to your buyers in small bottles and kegs. Either way you will be making your cool money.
Doing this business in a large scale will require getting the peddlers permit from DPR as well as registering with the NUPENG if you are deploying a truck.
#3. Distribution of Diesel
Diesel or Automated Gas Oil (AGO) is in high demand. Factory operators, telecommunication operators like MTN, Airtel, etc; large offices, high residential buildings and estates, all use AGO to power and run their engines and generators.
The business of diesel sale and distribution is about getting orders from these consumers and supplying them the products in their homes, offices and factories.
To do this business effectively you will require to invest in at least one truck or rent one for your supplies. You get others from the end users, go to depots and get the products, higher a truck and then take the products to your customers.
This business will continue to be lucrative as long as electricity supply in Nigeria remain epileptic. And business owners have to rely on generators to power their operations.
#4. Petroleum Products Trader
Trading in petroleum products is the most common way people engage in oil and gas business. Common products traded include Premium Motor Spirit (PMS), Automotive Gas Oil (AGO) and Dual Purpose Kerosene (DPK). Also traded are non so common products like Marine Gas Oil, Jet Fuel, Lubricant and Greases.
The business of petroleum product trading is margin driven. This means that the higher the volume, the more the profits. Consequently, it requires huge capital outlay to do this business.
The big players are those who owns tank farms or storage facilities.
However, opportunities exist for regular entrepreneurs in the bulk breaking segment of the chain. This involves buying in bulk from the big time importers of the products, and supplying to end retailers like filling station owners, etc.
A lot of people in the oil and gas business are simply bulk breakers. With an investment of between 5,000,000 to to 10,000,000, one can easily get into the business of bulk breaking petroleum products.
You will have to study the market carefully and decide on the product to trade in. Choose one product at a time, become good at it, achieve necessary mileage before considering venturing into other products. This is important because each petroleum product has its peculiarities.
You will need a DPR license to do this business.
#5. Sale of Lubricant
In oil and gas industry, lubricants are huge consumable products that are in very high demand. Lubricants have both industrial and domestic applications, particularly in vehicles and other forms of motorized engines.
Common lubricants in daily use include engine oil, automatic transmission fluid, brake and clutch fluid; oil treatment, and so on.
A 2018 research showed that the Nigerian lubricant market was expected to hit over NGN405 billion even though lubricant production in the country remains at its infancy. More lubricants are imported to meet demand.
The big players in the lubricant subsector are usually the major oil and gas companies as well as the independent marketers. Some of these include: 11 PLc, Total, Enterna Oil, Tonimas, etc.
Yet there are opportunities for small time entrepreneurs to make money from the growing lubricant markets. All you need do is buy from the importers, and sell to end users. Open a small shop or even a kiosk, display your wares and you are in big business.
These products are sold in filling stations but they are not able to meet demand. Locate your shop on a busy streets and you have all the neighborhood as your immediate market.
The key success factor here is to ensure you buy quality products. Develop relationships with the mechanics and technicians in your neighborhood and you will find you never lack patronage.
#6. Become an Oil and Gas Broker
Becoming a broker could be the easiest way to break into the oil and industry business if you don’t the finance. However, you will need to have good social capital and network within the industry. This business is for you if you have a good working experience of the any segment of the industry. It could be the upstream, mid-stream or the downstream.
You will need a good understanding of product sourcing, regulatory framework, and relationship with major industry players.
What does an oil and gas broker do? Simple! He is the middle man who brokers business between the product owner and the customers who needs the product. He brings them together and when the business is consumed, he receives a commission or brokerage.
#7. Oil and Gas Services Provider (Company)
One very interesting thing about the oil and gas industry is that the industry thrives on a variety of independent service providers.
As a matter of fact, the major upstream players like Exxon Mobil, Chevron, shell and the rest use a lot of independent contractors to power their operations. Yet, there are a lot of services that independent contractors also provide for the downstream sector.
Some of the services that independent contractors provide for the oil and gas industry include highly technical or scientific services like engineering services, drilling services, environmental services, cleaning of tanks, welding services, marine services. There are also non so technical or logistics support that independent contractors provide to the oil and gas industry.
Some of these include: vessel supply, catering services and maintenance of crew members, security services and supply of non technical staff, amongst others.
Identify your area of competence and set up an oil and gas services company to provide support to both the upstream, downstream and midstream sectors.
You will need to obtain relevant permit from the Department of Petroleum Resources, get registered on the Nipex platform as well as register with the major IOC’s in order to bid for contracts.
In addition to technical competencies, you will need good network and relationship within the industry to make a success in the business. You will also need to form alliances with international equipment manufacturers or service providers to be able to prove yourself as competent and capable before IOC’s.
Halliburton and Schlumberger are some of the popular oil and servicing companies with global appeal. However, the opportunities are so vast that a good number of small operators still have space to compete.
#8. Petroleum Product Haulage Business
This a very lucrative business in the midstream sector. It is about providing facilities to transport petroleum products from the depots to filling stations.
Most of the tanker trucks you see around carrying petroleum petroleum products on the roads are provided by independent contractors.
Approach the major petroleum product marketers, register with them to provide trucking services, get some trucks and provide the necessary logistics. Then, you are in big business.
#9. Supply Safety Materials & Equipment
The oil and gas industry pays high premium on safety. The industry is not only very technical, it is also hazardous. Thus, workers must be protected.
One of the ways of ensuring workers safety is by providing them with Personal Protective Equipment (PPE). Hence, industry operators invest heavily in the purchase of these PPE. And here in lies the business opportunity.
Set up a retail business involved in the procurement and supply of PPE’s to the oil and gas industry and such other businesses. What you will be selling include: protective clothing, protective hats, steel toe shoes, protective glasses, boots and dusk masks, amongst many others.
You source the products from local and offshore manufacturers, store them up in your shop and sell from there. Apart from customers who would walk-in to buy, you will have the opportunity of supplying directly to oil and gas exploration companies as well as companies involved in downstream operations.
#10. Oil and Gas Publications
You are interested in oil and gas money but you can’t immediately raise the needed capital to start? Or you have journalistic skills, you can write; why not start an oil and gas industry focused publication? It can be a magazine or a journal.
Report industry activities, review industry policies, publish industry events, interview personalities. Monetize your publication with ad revenue, sponsored articles, special series. The opportunities are many.
Starting an industry specific publication is even easier now with the pervasive role of the internet. With very minimal investment, you can set up a blog and start creating content.
Within a short space of time, you blog will gain traction and you begin to monetize. Your publication can easily become a highly sort after resource or source of information for business executives, investors and policy makers. The kind of money you make with your industry specific publication, be it offline or online, is a direct function of the kind of value you are able to create with it.
Here you have it: Small Business Ideas in Nigeria Oil and Gas Industry. I have been deliberate with this list, only highlighting businesses you can do with very minimal investment. Some of these business you can actually start with as little as 200,000. Some others, what you may need most is your relationship, skill and network.
However, like in all businesses, entrepreneurial endeavours are serious matter. You must be methodical when deciding on a business idea. The fact that you may not need so much in terms of initial capital outlay does not make the business less significant.
Always do your research, conduct your due diligence, investigate and study the market and possibly prepare your business plan. This exercise will help you assess and convince yourself of the suitability of the business you want to do.
Need help with your planning? Consult with us. I and my team are available to help you with the planning including feasibility studies and development of a great business plan for your projects. We do this at a cost friendly to your economy.
Buchi creates content and leads the Team at Stalwart Investment Partners; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.